US consumer spending flat in May as auto sales slump

Consumer spending was unchanged in May for the first time in almost a year, likely reflecting a plunge in auto sales, according to a government report, that also showed a build-up in underlying inflation pressures.

The flat reading in consumer spending came after 10 straight months of gains, the Commerce Department said, and followed a downwardly revised 0.3 percent gain in April.

When adjusted for inflation, spending fell 0.1 percent in May, declining for a second straight month. Spending on durable goods fell 1.5 percent after being flat in April.

May's weak reading suggests that consumer spending, which has been hampered by high gasoline prices, in the second quarter will be much slower than the 2.2 percent annual rate recorded in the first three months of the year.

The personal consumption expenditures price (PCE) index rose 0.2 percent after rising 0.3 percent in April. Compared to May last year, the index was up 2.5 percent, the largest rise since January 2010, after increasing 2.2 percent in April.

The core PCE index - excluding food and energy - increased 0.3 percent, the largest increase since October 2009, after rising 0.2 percent the prior month.

The core index, which is closely watched by Federal Reserve officials, increased 1.2 percent in the 12 months through May, the biggest increase since August. The index rose 1.1 percent year-on-year in April and the Fed would like to see it close to 2 percent.

Incomes rose 0.3 percent last month, slightly below expectations for a 0.4 percent increase. Incomes gained 0.3 percent in April.